The experts, Adam Partington and Esther Smith advise on working out holiday leave for a sick employee.
The question: Sickness and holiday pay
Situation:
- Employee off on sick leave for 7.5 months. Received Full pay for 6 months, half pay for the remaining 1.5 months. Company policy)
- Returned to work on a fit note with reduced hours (Normal hours = 37.5 per week, 7.5hours/day)
- July Fit note = 24 hours per week
- August Fit note = 25 hours per week
- Annual holidays are usually 25 plus Bank Holidays.
- Question 1: what should the employee be paid for the August bank Holiday? 5 hours or 7.5 hours?
- Question 2: If the employee takes a week’s leave should they be paid for 37.5hours or 25 hours?
- Question 3: Should the holiday entitlement be pro rata’d or stay the same?
Legal advice:
Adam Partington, solicitor, Speechly Bircham
In order to provide specific advice in relation to this issue it would be necessary to understand what the usual approach (if any) is in relation to such employees, the specific contractual arrangement in place with the employee in question, whether the new working hours amount to a binding variation to the employee’s contract of employment, what their new pattern of work is, and whether their pay has been pro rated accordingly.
It may also be important to understand the nature of the employee’s sickness and whether this could amount to a disability under the Disability Discrimination Act. In the absence of this information it is only possible to provide general guidance. You should, therefore, obtain specific legal advice on this issue.
In relation to calculating the amount of holiday pay as you ask at question one and two, under regulation 16 of the Working Time Regulations 1998, a worker is entitled to be paid during statutory annual leave at a rate of a week’s pay for each week of leave. The exact way in which the payment is calculated depends on a number of factors. Workers with normal working hours whose pay does not vary with the amount of work done are entitled to the "amount which is payable… if the [worker] works throughout his normal working hours in a week" (section 221(2), Employment Rights Act 1996).
In general, paid holiday entitlement for part-time workers should be calculated on a pro rata basis to that of full-time workers. It is, however, unclear on the information available whether or not the individual concerned would be considered to be a part-time worker and whether their reduced hours could be said to be their “normal” working hours.
It would therefore be important to establish the pattern of the employee’s new working hours and would require a more detailed explanation of the underlying arrangement with the employee, including whether their salary has been reduced to reflect the reduced hours.
Furthermore, you have indicated that you normally give your employees more than their statutory entitlement (which is 5.6 weeks’ annual leave). Where statutory holiday and contractual holiday are paid at different rates, it may be crucial to determine what sort of leave (statutory or contractual), the employee is taking at any one time.
In relation to your question three, generally speaking, where full-time workers receive more than the statutory minimum holiday entitlement (of 5.6 weeks’ annual leave), part-time workers should also receive more than the statutory minimum, calculated on a pro rata basis. It is unclear what the employee’s new working pattern is and, in light of this, how you would pro-rata the employee’s holiday entitlement.
As before, it would be important to establish whether or not the new working hours are contractually binding. You would need to obtain specific advice based on a more detailed explanation of the facts. Furthermore, following the European Court of Justice decision in the case of Stringer and others v HM Revenue & Customs; Schultz-Hoff v Deutsche Rentenversicherung Bund [2009] the employee could argue that they continue to accrue holiday in the normal way and that it should not be pro-rated.
**************
Esther Smith, partner, Thomas Eggar
If I have understood the situation properly, the employee returned to work on reduced hours on doctor’s advice. Also, whilst you don’t say so in your question I assume the return to work on reduced hours is a temporary measure to facilitate a full return to full time hours, rather than being a permanent change to their contractual terms and conditions.
In reply to your specific questions (although please note that this opinion is being given without the benefit of looking at any contractual documentation or correspondence, which may well affect the company’s position):
- Bank holidays should be paid at the normal 7.5 hour rate. This is the level they would be paid if they were off sick, and before the temporary reduction in their working hours.
- Holiday entitlement should also be at their full rate of pay, if they take leave. The reduction in working hours is temporary and their contractual entitlement to hours / holiday remains at the level of 7.5 per day.
- Unless the phased return is anticipated to last for a significant period of time you would not expect an employer to reduce holiday entitlement to a pro rata basis, but leave it at the employee’s normal contractual entitlement. In theory there is nothing to stop you reducing it, so long as you document this appropriately as part of the phased return, although there is the potential for an employee covered by the DDA to argue that consideration of accrual of holiday at their previous full time rate would be a reasonable adjustment that the employer should consider.
Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information, please visit Thomas Eggar.
